India to Scale Back Russian Oil Imports, Nayara Energy an Exception
India plans to scale back crude oil purchases from Russia following a trade agreement with the U.S. for lower tariffs. Most refiners will cease new orders after existing commitments, but Nayara Energy remains an exception due to sanctions limiting alternatives. Analysts expect a slow near-term reduction, with Russian volumes remaining economically critical. India plans to diversify by increasing U.S. and potentially Venezuelan oil imports, though full disengagement from Russian oil is not anticipated immediately.
India has agreed to scale back its crude oil imports from Russia, a move that secured the US rescinding a punitive 25% duty on Indian imports. While no formal directive has been issued, refiners are informally advised to reduce purchases, honoring existing commitments but not placing new orders. Several major refiners, including HPCL and Reliance, are winding down or ceasing Russian oil buys. Nayara Energy is a notable exception; due to EU and UK sanctions on its Russian-linked ownership, it has limited alternatives and will continue sourcing Russian oil from non-sanctioned entities.Russian oil imports to India have already been declining since earlier US sanctions, dropping significantly from a peak in May 2023. The new US agreement is expected to halve these imports further. However, analysts, such as Sumit Ritolia from Kpler, predict a slow near-term reduction because Russian volumes are locked in for several weeks and remain crucial for India's refining system due to deep discounts. Prashant Vasisht of Icra suggests India will likely increase imports from the US and possibly Venezuela. Historically, Russian crude comprised less than 2% of India's total imports before FY2023, indicating readily available alternatives. Replacing Russian crude with market-priced options is estimated to increase India's import bill by less than 2%. Venezuelan heavy and sour crudes are also considered a cost-effective alternative for Indian refiners.
